SoFi stock falls after announcing $1.5B public offering of common stock
The sportsbook also announced that it is leaving Las Vegas, along with DraftKings (NASDAQ:DKNG)
Flutter Entertainment (NYSE:FLUT), the parent company of leading online sportsbook FanDuel, saw its stock price drop some 12% on Thursday after it released third quarter earnings.
While the company officially announced that it is entering prediction markets with the launch of FanDuel Predicts, the stock dropped as the firm missed revenue estimates and lowered its guidance for fiscal 2025.
In addition, Flutter said it was leaving the Las Vegas market, surrendering its license, along with DraftKings (DKNG). The somewhat complicated scenario is tied to its prediction market launch.
- Revenue: $3.79B. up 17% year-over-year. This missed consensus estimates of $3.89B.
- Net loss: $789M, down from a net loss of $114M in Q3 2024.
- Loss per share: $3.91 per share, down from a loss of 58 cents per share.
- Adjusted EBITDA: $478M, up 6% year-over-year.
- Adjusted earnings: $1.64 per share, up 29% year-over-year. This beat estimates of 79 cents per share.
The GAAP net loss was so high due to two large one-time payments – a $556 million impairment charge triggered by regulatory changes in India and a $205 million payment to Boyd Gaming to revise its market access terms.
FanDuel Predicts to Debut
The big news was the announced launch of FanDuel Predicts in December, in conjunction with derivatives marketplace, CME Group (CME). FanDuel Predicts will be a standalone mobile app where users can essentially bet on sports outcomes in states where online sports betting is not yet legal. If these states legalize online sports betting, FanDuel will stop offering FanDuel Predicts in those states.
The three most populated U.S. states – California, Texas, and Florida do not have online sports betting, so FanDuel Predicts will be available there, among other states.
“FanDuel Predicts unlocks an immediate growth opportunity by allowing us to offer a compelling sports product to the vast majority of the US adult population in states that do not currently have access to sports betting. This represents a significant incremental addressable market for FanDuel in addition to our existing sportsbook and iGaming business,” Flutter CEO Peter Jackson said in a letter to shareholders.
Jackson said the opportunity lies “solely in those states” as prediction markets are having a “negligible impact” in states where FanDuel sportsbook is available. He also expects FanDuel Predicts to accelerate customer acquisition when those states legalize sports betting.
Why Leave Las Vegas?
The other moving part in this maneuver is FanDuel’s decision to exit the Las Vegas market.
On Thursday, the Nevada Gaming Commission confirmed via a filing that it “accepted the surrender” of FanDuel’s license to offer online sports betting in the state. It also accepted DraftKings withdrawal from the state. DraftKings said in its Q3 earnings report that it plans to launch its prediction market product in the coming months.
The commission said it is because FanDuel and DraftKings “intend to engage in unlawful activities related to sports event contracts. This conduct is incompatible with their ability to participate in Nevada’s gaming industry.” The state considers sports prediction markets as illegal wagering, so any companies that offer it “may be subject to discipline under the Gaming Control Act.”
FanDuel had a minor presence in Las Vegas through its association with Boyd Gaming, but it was only available at Boyd’s Fremont Casino. DraftKings never actually launched in Las Vegas. BetMGM and Caesar’s are the dominant players in the market. Leadership at both MGM and Caesars said they would not put their licenses at risk in Vegas by entering sports prediction markets.
So, for FanDuel and DraftKings, the trade-off is that they get to pursue lucrative sports prediction revenue in these major markets where online sports betting is not allowed.
Stock Tumbles On Outlook
All this aside, Flutter stock was plummeting on Thursday, down about 12% as of mid-afternoon ET.
The major reason was its outlook, as the company reduced its outlook for fiscal 2025, due in part to “customer-friendly” sports results so far in Q4. It is also due to lower Q3 performance, Q4 sportsbook investments, FanDuel Predicts investments, tax costs associated with the Illinois wager fee, and the aforementioned Indian regulatory change.
Flutter now anticipates 2025 revenue of $16.69 billion and adjusted EBITDA of $2.915 billion at the midpoint. This is down about $570 million and $380 million, respectively, from previous guidance. But it still represents 19% and 24% year-over-year growth, respectively.
Flutter got a slew of analyst price target downgrades, mostly its weak outlook, which accelerated the selloff.